Posted on Wednesday, February 13, 2019

Which of the following violates an FTC rule?

a. A company produces barbecue grills at a Nevada plant. The major components are made in the U.S. but the knobs and tubing are made in Mexico. The company advertises that the grills are Made in the U.S.A.

b. A company advertises its product, which was invented in Seattle and manufactured in Bangladesh, as "Created in USA. "This claim is deceptive, according to the Federal Trade Commission, because consumers are likely to interpret the term "Created in the U.S.A." as Made in USA. This makes it an express or implied claim. In fact, even a picture of an American flag or a U.S. map with no words in an advertisement could convey an implied representation that a company's product is made domestically.

Since the recession and its aftermath, Americans have shown an increased interest in buying products made by their fellow citizens. The FTC, which is charged with preventing deception and unfairness in the marketplace, requires that products advertised asMade in USA be "all or virtually all" made in the U.S.

What does that mean? That "all significant parts and processing that go into the product must be of U.S. origin," the FTC states. "That is, the product should contain no — or negligible — foreign content" and must be made in the 50 states, the District of Columbia or the U.S. territories and possessions.

Take the case of the barbecue grills produced in Nevada. The major components of the grills are made domestically but the knobs and tubing are made in Mexico.

A Made in U.S.A. advertising claim is not likely to be deceptive, according to the FTC, because the knobs and tubing make up a negligible portion of the grills' total manufacturing costs and are insignificant parts of the final product.

If you want more information from the FTC about whether your product can be advertised as Made in U.S.A., click here.

Posted in Tax Topics For Individuals, Tax And Accounting Topics For Business

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